Pinterest, Inc.

Good afternoon, thank you for attending today's Pinterest Inc fourth quarter and full year 2024 earnings call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you'd like to queue for a question on today's call, you can do so by dialing star one on your telephone keypad. I'll now hand the call over to Andrew Somberg, Vice President of Investor Relations and Treasury to begin. Andrew, you may proceed.

Good afternoon. And thank you for joining us. Welcome to Pinterest earnings call for the fourth quarter and full year into December 31st, 2024. My name is Andrew Somburg and I'm vice president of investor relations and treasury for Pinterest. Joining me on today's call are Bill Reddy, Pinterest CEO and Julia Donnelly, our CFO. This conference call is being webcast and we are also providing a slide presentation to accompany our commentary. please refer to our investor relations website at investor.pinterest.com to find today's presentation, webcast, and earnings press release. Some of the statements that we make today regarding our performance, operations, and outlook may be considered forward-looking, and such statements involve a number of risks and uncertainties that could cause actual results to differ materially. In addition, our results, trends, and outlook for Q1 2025 and beyond are preliminary. and are not an assurance of future performance. We are making these forward-looking statements based on information available to us as of today, and we expressly disclaim any duty or obligation to update them later unless required by law. For more information about risks, uncertainties, and other factors that could affect our results, please refer to our most recent Form 10-K filed with the SEC and available on our Investor Relations website. During this call, we will present both GAAP and non-GAAP financial measures. A reconciliation of non-GAAP measures to the most directly comparable GAAP measures is included in today's earnings press release and presentation, which are distributed and available to the public through our investor relations website. Lastly, all growth rates discussed in today's prepared remarks should be considered year over year, unless otherwise specified. And now I'll turn the call over to Bill.

Thanks, Andrew. Good afternoon, and thank you for joining our fourth quarter and full year 2024 earnings call. My remarks today will cover the progress we made this past year and preview some of our key initiatives in 2025 to drive continued execution of our long-term goals. 2024 was a transformative year for Pinterest. We reached record high global users, surpassing 550 million MAUs globally and 100 million in UCAN, while more than doubling our full year revenue growth rate from 2023. At the same time, we delivered over $1 billion in adjusted EBITDA, a roughly 50% increase, as we continue to drive profitable growth. Our 2024 results are a testament that our long-term strategy is working. We've transformed our user experience to focus on why people come to Pinterest, investing in actionability, relevance, and curation, all while distinguishing ourselves as a positive place online. The user journey from inspiration to action maps directly to our advertiser funnel, allowing advertisers to reach users at every stage of their purchase journey. And in today's advertising environment, proving performance has never been more important. As such, we've spent the last two and a half years building a suite of lower funnel tools that captures our users' inherent commercial intent. Our efforts are paying off. In Q4, we achieved our first $1 billion revenue quarter, as we grew revenue 18%. and drove a record number of clicks during the critical holiday season. As we look forward to 2025, we intend to double down on the multi-year initiatives that underpin our strategy. We'll continue to leverage AI and our unique first-party signal to drive a more personalized and relevant experience for our users. At the same time, we'll invest in our curation experiences and the shopability of our platform to allow our users to move more seamlessly from inspiration to action. Finally, we'll continue to innovate and improve our lower funnel tools, allowing advertisers to successfully reach customers who are demonstrating high commercial intent. Now, like last quarter, I'll start with an overview of how we're utilizing AI to drive results across our business. AI is deeply integrated into nearly every aspect of our user experience and advertising business. But AI is only as good as a signal it acts upon. And at Pinterest, we have very unique signal. We have hundreds of billions of first-party user actions on our platform, including acts of human curation that give us unique insight into each individual pin's relationship, not just to the user who saved it, but also to the ideas and aesthetic reflected by the content of the board it is saved in and the search queries related to it. These associations between pins, searches, boards, products, and users make up our taste graph, which is the foundation of our AI recommendation engines and is used to amplify the quality of our computer vision and discovery experiences. In practice, our taste graph is an essential part of the AI that determines the content we show our users and why users find our recommendations so highly relevant. As our platform has grown and as we've incorporated more signals from user actions, our taste graph has become more dense with more connections and associations between pens, searches, boards, products, and users. In fact, Our taste graph contains many billions of connections and has grown by 75% over the past two years, bridging together user activity, content, and products across the platform. This larger taste graph enhances our ability to understand how images and products are related and surface exceptionally relevant content. For example, if we know a user is searching for and saving to a board labeled Super Bowl outfits, We recommend ideas based on the activity of all the other users on Pinterest who have similar taste and fashion and are interacting with game day apparel. And since we know this user is likely hosting or attending a Super Bowl party, we're able to help users laterally explore their taste to find other content or use cases that might be interesting to them, like game day decor or recipes that are personalized and relevant to them based on what we know about them from our taste graph. In doing so, We can drive deeper engagement and encourage revisitation, thereby strengthening our flywheel. Looking back at 2024, I want to highlight a few key AI-based initiatives, many of which have been informed by our taste graph, that have led to positive outcomes across the business. We've made a lot of progress incorporating more context on user history into our recommendation algorithms. In 2024, we leveraged cutting-edge machine learning techniques and increased the context window on user actions, such as saves and clicks, that fed into our AI-based models by over 30-fold. More context on users and more powerful machine learning models mean a deeper understanding of the content they might enjoy. And as a result, we saw approximately 250 basis points of lift in saves and a 150 basis point lift in outbound clicks across the platform. Importantly, Through our team's deep technical expertise, our engineering teams were able to achieve this 30-fold increase in signal ingestion at only a fractional increase in infrastructure spend. On the monetization side, our AI-powered whole page optimization product has enabled us to flex up relevant ad load to users in moments of high commercial intent. This means we can show users in the lower funnel phase of their shopping journey more ads to help them take action and convert. while keeping ad load lighter when users are in an upper funnel discovery phase. We've also made investments to keep the relevance bar high for our ads. In fact, relevance on our search surface has more than doubled for top ad spots over the past two years. Since our users come with commercial intent, these ads are additive to the user journey. We're also utilizing AI internally to promote employee productivity across our engineering team. Coding assistants help our developers accelerate code production and improve code quality. The majority of our engineering team uses coding assistants, and 15% of our current code base is generated through AI. Lastly, I'd be remiss not to point out Performance Plus, which I'll talk about in more depth later on in my remarks. Performance Plus is a key advancement in our lower funnel ad product suite that utilizes AI to bring greater performance and better efficiency to our advertisers while automating much of the campaign setup process. With that, I'd also like to discuss some of the user and engagement wins from Q4 and 2024. Throughout 2024, We focused heavily on improving the user experience and the reasons users came to Pinterest in the first place. This meant investing in a better curation experience through boards and collages and driving further actionability across our core surfaces. In Q4, we continued to deepen our efforts to show users how they could utilize Pinterest for shopping. Holiday shopping season kicked off with a bang and we saw users with high commercial intent lean into Pinterest to find and shop the best ideas and products for their loved ones. Our holiday shopping efforts, which included gift guides and promotions, drove deeper, more actionable sessions and helped more users find and buy the perfect gift on Pinterest. For example, we created gift guides spanning 27 categories, from fashion and beauty to travel and gaming, partnering with celebrities, creators, and brands to showcase nearly 40,000 of the best products from our catalog, a mix of both expertly curated and Pinterest-recommended content to maximize relevance for our users. We then distributed these guides through personalized recommendation modules, showcasing the guides that are the most relevant to a user's interests, past activity and search queries. We saw gift guides resonate with users as click through rates from products recommended through gift guides were over 40% higher than the average product pin. I'm pleased that our efforts to improve the actionability of our platform are paying off in the form of another quarter of record users. At the same time, We reported our highest ever weekly active to monthly active user ratio of 62% in 2024. This means users are coming back more frequently as we continue to drive strong product market fit and performance for advertisers. In fact, in Q4, we grew clicks to advertisers over 90%, even after lapping the initial launch of direct links that began in Q4 of last year. which is clear evidence that showing more relevant and shoppable content aligns with both the needs of our users and advertisers. Next, I want to mention one of my favorite reports that we share annually, Pinterest Predicts. Using consumer insights and predictive analytics based user behavior like clicks, saves, and searches that happen on Pinterest every day, we've identified the 20 emerging Pinterest trends that we believe will hit the mainstream in 2025. And over the last five years, 80% of the predictions we've made have come true. These trends reveal what people will shop, try, and buy next across all verticals. For example, our trend, Cherry Coated, predicts that Gen Z and millennials will infuse cherries into their makeup, menus, and aesthetics this year, and trend Peak Travel predicts that mountain ranges will become the ultimate travel destination for Gen Z and Gen X. Pinterest Predicts also serves as a valuable lever for advertisers to reach customers by aligning company initiatives with up-and-coming trends. Marriott Bonvoy leaned into the peak travel trend, partnered with Pinterest to bring it to life through a pop-up concierge desk in New York City. surprising people with peak travel themed giveaways. They're also sponsoring the trends on the platform through an exclusive predict badge. It will be live throughout 2025 on a variety of peak travel related pens that highlight exciting Marriott Envoy properties and mountainous locales. Looking to 2025, I'm incredibly excited for the evolution of our platform as we further lean into product features that can grow users, deepen engagement, and increase revisitation. We'll continue to invest in why users come to Pinterest and what makes our platform valuable to advertisers. This means further investing in functionality that allows users to identify and refine their taste and incorporating actionability throughout our core surfaces to allow users to take action and shop the products they love. Next, I'd like to discuss how we are improving monetization by increasing Pinterest's value and performance for advertisers. In 2024, we made impressive strides against our monetization priorities, particularly to transform our ad platform into a true lower funnel performance engine, which led us to deliver 19% revenue growth in 2024 compared to 9% in 2023. Looking back at some of our key lower funnel launches, we began with mobile deep linking and direct links to bring users directly to an advertiser's web or mobile property, enabling us to significantly grow clicks. We complemented these efforts with adoption of our privacy-centric measurement tools to prove our performance, giving advertisers the tools they need to accurately measure spend and vote with their dollars. We also created new formats like promotion ads to help retailers showcase special offers during key promotional periods. Advertisers leaned into this format over the Q4 holiday season, with those who included a promotion for their conversion campaign seeing an 18% increase in conversion rate compared to the same ads without a promotion. Finally, we built and launched Performance Plus to transform the advertiser experience. driving performance improvements through lower CPCs and CPAs, and automating much of their campaign workflow. These efforts culminated in a record Q4, as we delivered over $1 billion in revenue in a single quarter for the first time in our company's history, with our ad platform delivering significant gains compared to last year, given all the product innovation I just laid out. Digging into Q4, our advertisers saw immense value creation, with over 90% growth in clicks to advertisers year over year, on top of over 100% growth last Q4 as we lapped the initial direct links product rollout. The value we created also led to significant value capture as retailers leaned into Pinterest to drive results. In fact, we saw the largest volume of revenue ever over the Cyber 5 holiday surge while simultaneously decreasing CPAs by over 30% year over year. In 2025, we have a strong roadmap to continue to drive value to advertisers and capture additional share of wallet. Performance Plus is one component of this. Stepping back, It's worth noting that Performance Plus is at the beginning of a multi-year product cycle. We will continue to release new features and functionality while simultaneously continuing to drive adoption and increase the percent of revenue eligible to take advantage of key features within the automation suite. And while we're still early, I'm excited about the momentum we're building. We're seeing performance improvements positive advertiser feedback on the simplified campaign setup, and promising initial adoption of Performance Plus campaigns and features, while recognizing it's still in the early phases of rolling out. Expanding on our launch from last fall, we'll also build new features for Performance Plus in 2025, including enhanced bidding and creative functionality. ROAS bidding which optimizes bids to maximize return on ad spend, will be live to all eligible advertisers by the end of the year. Advertisers use a variety of different methods to see and measure their spend. In order to show up as accurately as possible wherever an advertiser is measuring their spend, we'll invest in scalable ways to continue to connect our conversion data into third-party measurement sources of truth. Our lower funnel advertiser offering is made possible by our ability to make ads relevant content for our users. As we've long said, when users come to Pinterest, they have a very different mindset than traditional social media. Often customers are coming to invest in themselves, find inspiration, shop, and take action. If you take our three main services, home feed, search, and related pins, you can see the purchase funnel come to life, with roughly one-third of our engagement on the home feed, while lower funnel search and related pins, a form of visual search, make up roughly two-thirds of our engagement. Because of this, relevant ads can improve the user experience and drive even more value to advertisers by more efficiently reaching the right audience at the right time. This flywheel improves over time as more intent signals feed more relevant content to help users shop and provide even more intent signals. Moreover, we have tangible evidence that the flywheel is working. Monthly active users continue to grow double digits, reaching all-time highs each consecutive quarter of 2024. Ad impressions are growing while clicks to advertisers are growing faster than ad impressions. and ad relevance on our search surface doubled over the past two years, as our models are able to capture more signals and more efficiently place ads in the right place at the right time. In 2025, we are continuing to leverage AI to grow ad load while growing users, improving relevance, and increasing shopping and actionability on the platform. Finally, I'll touch briefly on our monetization initiative to diversify demand through partnerships and international growth. 2024 marked a year of scaling our first third-party demand partnerships with Amazon ads and Google. We complimented these efforts by launching resellers in 30 markets in Q3. These efforts are paying off as the rest of world revenue growth accelerated throughout 2024. As I think about all we've accomplished in 2024, I'm filled with pride about the work our teams delivered across our strategic priorities and feel optimistic about what's to come in the year ahead. More importantly, I'm proud of how we're building our business. We've proven that a business model built on positivity not only benefits our users, particularly our Gen Z users, who value Pinterest as a place to manifest their dreams away from the toxicity found elsewhere on social media, but it leads to better business outcomes. We've consciously invested in products and policies that tune AI for positivity and ultimately help our users feel their best. For example, body type ranges and skin tone and hair pattern search let our users see themselves represented in the content on the platform. In fact, users who search with these refinement tools save, on average, seven percent.